Ireland's Department of Finance considers shutting down Apple tax shelter

By on October 17, 2013, 3:00 PM

Big companies have kept large sums of profits overseas in tax-friendly countries for years now, a practice that saw Apple CEO Tim Cook in front of the US Senate earlier this year. Apple is said to have more than $100 billion in cash stashed overseas where it is not subject to US taxes.

The company's Ireland-based holding company AIO (Apple Operations International) pays no US income taxes and is subject to an extremely low tax rate there, but according to a new report from Ireland's Department of Finance, changes might be on the horizon.

The report details Ireland's tax strategy along with a proposal containing potential alterations to the country's 2014 Finance Bill, that according to some, suggest that Apple's tax benefits could be on the way out. The Department of Finance notes that it will consider changes to its "company residence rules aimed at eliminating mismatches — that can exist between tax treaty partners in certain circumstances — being used to allow companies to be ‘stateless' in terms of their place of tax residence."

The move is said to be part of Ireland's continued cooperation with the European Union and The Organisation for Economic Co-operation and Development (OECD) on corporate tax issues. The report from the Department of Finance also talks about the country's efforts at dissolving what it calls "aggressive tax planning," a corporate practice the department says causes a lot of issues for global legislators.

Reports say the changes in question likely won't come into effect until January 2015, if they do indeed make their way into the 2014 Finance Bill.

(Image via Reuters)




User Comments: 19

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nazartp said:

Ha, nothing new here. All based on BEPS paper. And as if it relates to Apple only.

2 people like this | VitalyT VitalyT said:

I live in Ireland. 2014 budget was published just 2 days ago, with focus on promoting businesses and cutting on social stuff, like pensions. Looks like Apple got the wind of it, in the wrong way. Apple & Google have been known as the biggest tax evaders in the world, putting the rest of us in shame. This is how you steal money from the government.

2 people like this | MilwaukeeMike said:

This was a campaign point for Mitt Romney last year (remember him?) But the big tech companies gave lots of money to Obama's campaign and the issue of evading taxes like this has been forgotten.

The thing is though, unless the US changes their laws, Apple will just move to another tax shelter country. I think Google uses someplace in the Caribbean, the DR maybe... I don't remember.

And we know the US won't change the laws. Our govt isn't going to upset two gigantic financial contributors with the 2014 elections coming up.

1 person liked this | mctommy said:

All the big boys do it. If one country changes its tax shelter laws, they'll just move to another country which will open its arms wide wide open.

nazartp said:

This was a campaign point for Mitt Romney last year (remember him?) But the big tech companies gave lots of money to Obama's campaign and the issue of evading taxes like this has been forgotten.

The thing is though, unless the US changes their laws, Apple will just move to another tax shelter country. I think Google uses someplace in the Caribbean, the DR maybe... I don't remember.

And we know the US won't change the laws. Our govt isn't going to upset two gigantic financial contributors with the 2014 elections coming up.

Really, not a "tax shelter" country. To be a viable candidate for tax planning the country needs to meet several requirements: 1) relatively low tax rate; 2) stable and developed legal and court system; 3) significant tax treaty network and 4) exploitable interactions with other tax jurisdictions' tax codes. There are, probably, just a handful of countries, globally, that fit the bill.

Realistically, unless the tax rate is relatively the same globally, these problems will exist permanently. BTW, calling the corporations "evil" is a disservice - ALL of tax planning is driven by the shareholders. Do you think C level executives have nothing else to do but spend inordinate amount of time and resources but to read tax codes?

MilwaukeeMike said:

Really, not a "tax shelter" country. To be a viable candidate for tax planning the country needs to meet several requirements: 1) relatively low tax rate; 2) stable and developed legal and court system; 3) significant tax treaty network and 4) exploitable interactions with other tax jurisdictions' tax codes. There are, probably, just a handful of countries, globally, that fit the bill.

Realistically, unless the tax rate is relatively the same globally, these problems will exist permanently. BTW, calling the corporations "evil" is a disservice - ALL of tax planning is driven by the shareholders. Do you think C level executives have nothing else to do but spend inordinate amount of time and resources but to read tax codes?

I never said corporations are evil, and I never would. And no, the execs don't sit around reading tax code, they hire entire departments to do it for them. I don't blame corporations for dodging tax laws. Corporations deal with taxes exactly like the rest of us; they pay exactly what they have to and even often ever more to avoid fines. If it's legal (and it is) to setup an office in another country and get around US law, then they'll do it.

2 people like this | Saintnsinner said:

Those evil corporations who provide jobs and benefits to thousands of people all across the nation, how dare they hide their money from our generous and all knowing government? Just think how many cell phone and EBT cards they could give out to the needy. I wonder what they do with all that money? To think they might take that money and through new products and innovation grow their companies so they could provide even more jobs to the masses. Evil greedy capitalism, for shame Apple, for shame.

1 person liked this | captaincranky captaincranky, TechSpot Addict, said:

Those evil corporations who provide jobs and benefits to thousands of people all across the nation, how dare they hide their money from our generous and all knowing government? Just think how many cell phone and EBT cards they could give out to the needy. I wonder what they do with all that money? To think they might take that money and through new products and innovation grow their companies so they could provide even more jobs to the masses. Evil greedy capitalism, for shame Apple, for shame.

Right... Apple provides thousands of jobs all across the nation....(wait for it)....of China.....

I guess you've never heard of Foxconn, right.

And BTW, Apple intends to bring "jobs" back to the US........(wait for it)....for robots.......

And as far as this horse s*** about "innovation goes, that's exactly what the world needs, in the form of a shinier iPad and a pink iPhone. Now why don't you scurry off and get a clue.

H3llion H3llion, TechSpot Paladin, said:

This was a campaign point for Mitt Romney last year (remember him?) But the big tech companies gave lots of money to Obama's campaign and the issue of evading taxes like this has been forgotten.

The thing is though, unless the US changes their laws, Apple will just move to another tax shelter country. I think Google uses someplace in the Caribbean, the DR maybe... I don't remember.

And we know the US won't change the laws. Our govt isn't going to upset two gigantic financial contributors with the 2014 elections coming up.

... and thankfully he was not elected.

2 people like this | Capaill said:

I also live in Ireland and this recent news about Apple is not linked to the Budget from a few days ago which has made no changes to Ireland's corporation tax rate of 12.5%.

The IMF recently approved of Ireland's tax rate and is happy with it. In return, the Irish government has stated its intention to try to close the loopholes that allow a company like Apple (which has no manufacturing or sales in Ireland) to pay tax in Ireland at an effective rate of around 2%.

Apple and Google are among the exceptions to the tax rule in Ireland and frankly I'm not sure how they are getting that tax rate. Unlike most countries, Ireland has few credits or discounts that would allow companies to reduce their tax rate, so the final tax paid by companies in Ireland is often higher than that paid in other countries.

Each sovereign nation is free to set up its tax rules as it pleases, within international laws and to attract foreign investment. So it is easy for international corporations to play one country against another to find the better deal.

As Apple does most of its manufacturing in China and presumably most of its sales in the US, why is it not taxed there instead? Clearly there are loopholes in those countries too that allow the corporations to play this international tax game.

Finally, while the Irish government has stated its intention to close the loopholes, I'm sure they don't want Apple to move out of Ireland. After all, 2% of billions is better than 12.5% of 0. I look forward to seeing how these loopholes should be closed or reduced.

MilwaukeeMike said:

... and thankfully he [Romney] was not elected.

Hey, you won't hear me complain. I'm in my 30s, so I'm not fresh out of college looking for a job in a country with 7% unemployment and a falling workforce participation rate.

I have a full time job, so I'm not trying to find a job in an economy where a heath care law is encouraging employers to offer multiple part time jobs instead of a full time carreer with benefits.

I'm also lucky enough to have a 401k and some money in the stock market, which hit an ALL TIME HIGH (hooray!) yesterday. It's up like almost 20% on the year thanks to the Fed's policy of buying bonds and low interest rates (Low interest rates means you can make more money in equities, and it drives up the stock markets). Obama just nominated Janet Yellen for the new Fed chairwoman, and she's famous for her policies on government spending as a economy boost. So the markets should continue to do fine barring some catastrophe.

So the rich are getting richer, and the poor are staying poor. The scary thing though... I don't think it bothers Obama. He needs rich people, because that's his favorite group to tax. And he needs poor people, to make promises to for votes.

So, me, personally, I can't complain...especially with so many people struggling.

mojorisin23 mojorisin23 said:

Those evil corporations who provide jobs and benefits to thousands of people all across the nation, how dare they hide their money from our generous and all knowing government? Just think how many cell phone and EBT cards they could give out to the needy. I wonder what they do with all that money? To think they might take that money and through new products and innovation grow their companies so they could provide even more jobs to the masses. Evil greedy capitalism, for shame Apple, for shame.

Right... Apple provides thousands of jobs all across the nation....(wait for it)....of China.....

I guess you've never heard of Foxconn, right.

And BTW, Apple intends to bring "jobs" back to the US........(wait for it)....for robots.......

And as far as this horse s*** about "innovation goes, that's exactly what the world needs, in the form of a shinier iPad and a pink iPhone. Now why don't you scurry off and get a clue.

Thats not correct... Foxconn is a completely separate company. Apple does employ 50k employees in the US. Plus the 100k or so app developers and suppliers they use....how many do you employ?

captaincranky captaincranky, TechSpot Addict, said:

Thats not correct... Foxconn is a completely separate company. Apple does employ 50k employees in the US. Plus the 100k or so app developers and suppliers they use....how many do you employ?
Foxconn is Apple's OEM. They're in China. They have suicide nets around at least one of their factories. It's the one that produces Apple products. This was on ABC's "Nightline"

Visit a page on the topic here: [link]

Many manufacturers are considering moving their production facilities back to the US. Industrial robots have come of age. This way, they can oversee production with a staff of 100, in lieu of a production staff of 2000. Plus, it sounds like a good idea when you get the right liar to spin it for you.

Are you a big employer, or do you just worship Apple for being one.?

And as far as independent app developers go, I be willing to venture to say a lot of them have done bunch of work for nothing, either because of rejections, or duplications.

And next time, why don't you consider some actual facts before you launch a big rebuttal?

nazartp said:

Apple and Google are among the exceptions to the tax rule in Ireland and frankly I'm not sure how they are getting that tax rate. Unlike most countries, Ireland has few credits or discounts that would allow companies to reduce their tax rate, so the final tax paid by companies in Ireland is often higher than that paid in other countries.

That's a fairly complex work on the interaction of several provisions of several tax codes. "Double Irish," in a very simplified way, is ownership structure such that one of the entities has no operations, but is Irish resident and another has operations, but, technically, not a resident. Therefore, only a portion of income is taxable and the EFFECTIVE tax rate is very low, even though the nominal tax rate is 12.5%.

H3llion H3llion, TechSpot Paladin, said:

Hey, you won't hear me complain. I'm in my 30s, so I'm not fresh out of college looking for a job in a country with 7% unemployment and a falling workforce participation rate.

I have a full time job, so I'm not trying to find a job in an economy where a heath care law is encouraging employers to offer multiple part time jobs instead of a full time carreer with benefits.

I'm also lucky enough to have a 401k and some money in the stock market, which hit an ALL TIME HIGH (hooray!) yesterday. It's up like almost 20% on the year thanks to the Fed's policy of buying bonds and low interest rates (Low interest rates means you can make more money in equities, and it drives up the stock markets). Obama just nominated Janet Yellen for the new Fed chairwoman, and she's famous for her policies on government spending as a economy boost. So the markets should continue to do fine barring some catastrophe.

So the rich are getting richer, and the poor are staying poor. The scary thing though... I don't think it bothers Obama. He needs rich people, because that's his favorite group to tax. And he needs poor people, to make promises to for votes.

So, me, personally, I can't complain...especially with so many people struggling.

I seriously doubt Romney would have change any of that, at the end of the day, the President has limited power. Just like 2008 elections, you have two shits in the finals, you will still end up with a shit. I believe that the best candidate was infact Ron Paul, although he did not seem like an aggressive candidate which to me is not a great trait.

MilwaukeeMike said:

I seriously doubt Romney would have change any of that, at the end of the day, the President has limited power. Just like 2008 elections, you have two shits in the finals, you will still end up with a ****. I believe that the best candidate was infact Ron Paul, although he did not seem like an aggressive candidate which to me is not a great trait.

You're right, and it's easy to say things would have been better. It's why the best way for your favorite political party to get into power is to let the other party screw things up for a while.

Even though we don't have a crystal ball....If Romney were president I would confident saying that the stock market probably wouldn't be quite as high and we definitely wouldn't have Obamacare.

H3llion H3llion, TechSpot Paladin, said:

You're right, and it's easy to say things would have been better. It's why the best way for your favorite political party to get into power is to let the other party screw things up for a while.

Even though we don't have a crystal ball....If Romney were president I would confident saying that the stock market probably wouldn't be quite as high and we definitely wouldn't have Obamacare.

Personally, I don't have a political party. I merely listen to the ideals of each president and see what others are saying in the online discussions. To me Ron Paul was the most logical choice. Shame about his age and resignation, he was getting huge support on the Internet, but the whole electoral collage screwed him over.

Hopefully the US can finally leave the Electoral College bs and actually begin a real democracy they so praise.

Oh and I guess we won't see the the actual benefits of Obama yet, we seen the shitstorm Bush has caused for 8 years, it will take another few years to actually recover and see if Obamas changes have done anything major. It sort of an aftereffect. They "rule" for couple of years, then the new president steps in power but the effects of the previous are still circulating. I guess by 2016 we have nice and clear vision of what ''Obama'' has done.

SNGX1275 SNGX1275, TS Forces Special, said:

To me Ron Paul was the most logical choice. Shame about his age and resignation, he was getting huge support on the Internet, but the whole electoral collage screwed him over.

Hopefully the US can finally leave the Electoral College bs and actually begin a real democracy they so praise.

I agree on Paul.

Disagree on the EC. Sure it is flawed, shrink that down to a district scale and it gets real bad where lines are drawn for votes (on a map), and who decides where those lines are drawn. But look at those red vs blue maps, red dominates the land area. Most of what the US produces for consumption comes from the red areas of the map. Getting rid of the EC will take away those states' say in what policies are approved. Things are a lot more complex than they initially appear.

MilwaukeeMike said:

Oh and I guess we won't see the the actual benefits of Obama yet, we seen the shitstorm Bush has caused for 8 years, it will take another few years to actually recover and see if Obamas changes have done anything major. It sort of an aftereffect. They "rule" for couple of years, then the new president steps in power but the effects of the previous are still circulating. I guess by 2016 we have nice and clear vision of what ''Obama'' has done.

Sooner or later we're going to have to stop blaming Bush for AIG getting in way too deep in credit default swaps, and we're going to have to stop blaming him for the Big Three auto companies making 40 years of promises they can't keep to their unions. We'll have to stop blaming him for Countrywide mortgage and the like giving out ARM loans on properties that were overpriced.

I agree with you, there can be an after effect, and it can take a few years for things to work their way through. But looking at the real estate bubble brings up a point you made earlier. The president doesn't have that kind of power. Al Gore could have won in 2004 and we'd still have had the bubble burst. Just like in 2001 with the dot com bust, it wasn't Clinton's or Bush's fault. I don't think the president has that kind of power over the economy. The only thing I can think of that a president has done to really affect the economy is the affordable care act because there are so many specific laws for businesses to follow. And I think by 2015 we'll have a very good picture of what it's done... or maybe what it hasn't done.

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